“The Bad Boy of Silicon Valley” Advises We “Do Nothing and Let the Invisible Hand Fix the Problem Free of Charge”

The author of the comments quoted below was the founder and CEO of Cypress Semiconductor Corporation.

(p. A17) In the late 1970s cars became computerized. My first Silicon Valley employer, American Microsystems, once “lost the recipe” and cut off the supply of memory chips to a Lincoln Continental plant. Without our chips, cars couldn’t be started. Ford later dropped us as a vendor, the penalty for shutting down an auto plant.

Soon the automotive industry created an extensive repertoire of reliability and sourcing qualifications that prevented many such problems but also mired the industry in bureaucracy. Today, the qualification process for a new chip vendor takes 18 to 24 months or more. That’s why automotive companies can’t simply buy a scarce chip from another vendor in a crunch to keep the lines running.

. . .

Auto companies slashed their chip orders at the pandemic’s outset, and supply responded accordingly. But when auto demand surprised everybody by staying strong, and auto makers suddenly needed more chips, the semiconductor industry couldn’t respond quickly enough. Even with robotic factories, it takes 12 weeks on average to make a silicon wafer—longer if advanced processes are required—and that’s before back-end assembly and shipping around the world. President Biden says he is “studying” supply chains, but every knowledgeable person in the industry knows that politics and subsidies are irrelevant. The market players will fill this chip shortage before the Democrats and Republicans finish arguing about whose fault it is.

. . .

There is no need to give taxpayers’ money to some of the smartest and richest corporations in the world. Chip companies thrive in free markets and barely survive in controlled economies. This message shouldn’t be controversial, but in 1991 my distaste for pork-barrel spending got me labeled “The Bad Boy of Silicon Valley” on the cover of BusinessWeek. My proposed solution to the current chip problem? Do nothing and let the invisible hand fix the problem free of charge.

For the full commentary, see:

T.J. Rodgers. “Government Won’t Fix Chip Shortage.” The Wall Street Journal (Thursday, April 29, 2021): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 28, 2021, and has the title “Government Won’t Fix the Semiconductor Shortage.”)

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